RMB Exchange Rate Subsidy Dispute Under WTO Framework And Countermeasures

Along with the rapid development of China’s economy, the current account and capital account have formed a huge twin surplus. The western countries direct its spearhead against RMB exchange rate; also, it has become a hot issue in Sino-US economic and trade relations, and even influencing the international community. The United States and Japan constantly accused that Chinese government deliberately maintains the RMB exchange at an underestimated level to remain a competitive price of export products which prohibits subsidies in the WTO legal framework. Thus, by the threat of submitting to the WTO Dispute Settlement Body or domestic imposition of countervailing duties, they force the appreciation of RMB exchange rate. The global financial crisis in2008draws a moderating effect to the allegations of the RMB exchange rate. However, the factors like US-led Western countries fight back the allegation of RMB exchange rate during the time that the trend of financial crisis becomes stable, and the recession in the post-crisis triggers a strong trade protectionist sentiment, the concerns on China’ exchange rate is strengthened. On Oct11th2011, the U.S. Senate again passed the Currency Exchange Rate Surveillance Reform Bill, which requires the U.S. government to change the policy to the underestimated exchange rate countries and to take practical action to impose punitive tariffs aiming at China. All these resulted in tremendous pressure and severe impact to China.Due to the above situation, this paper based on international laws and regulations of exchange rate and subsidies under WTO regime, originating from Agreement on Subsidies and Countervailing Measures, after systematically analyzing the original, development, reason and component forms of the RMB exchange rate subsidy, tries to finds out the real meaning of international legal system, and impartially judges the accusation on RMB exchange rate by the western countries. Based on the principle of relevant international laws and regulations, and legal, political, economic, diplomatic point of view from home and broad, this paper strikes a powerful counterblow to western countries’accusation, alleviates the appreciation pressure of RMB exchange rate, and safeguards the legitimate rights and interests to independently promote exchange rate reform. Finally, this paper proposes that China should actively participate in international currency reform, and advance in-depth reform of the RMB exchange rate system with innovation, practice and operability in a controlled and progressive speed.